World economy stumbling towards two-track recovery: Report

The latest update of the Brookings-Financial Times Tracking Indexes for the Global Economic Recovery (TIGER) reveals grounds for optimism about global growth prospects but also renewed concerns about impediments to a strong recovery. The report—a set of composite indexes—has been constructed by Eswar Prasad of Brookings and Aryan Khanna and Darren Chang of Cornell, in collaboration with the Financial Times.

The US and China are shaping up to be the main drivers of global growth in 2021, says the update to the TIGER report. Household consumption and business investment have surged in both economies, along with measures of private sector confidence. Industrial production has rebounded in most countries, contributing to firming commodity prices and robust international trade. However, the US, China, and India are likely to be the only major economies (along with Indonesia and South Korea) that exceed pre-COVID-19 GDP levels by the end of 2021. In most other regions, the scarring effects of the 2020 recession on both GDP and employment are likely to be longer-lasting, according to the report.

The US economy is poised for a breakout year as massive fiscal stimulus, loose monetary policies, and pent-up demand power rapid GDP growth. Renewed consumer and business confidence have been reflected in generally strong consumption and business investment growth, while financial markets have continued to perform well. Labor market performance has been encouraging, although progress in job growth and unemployment reduction has been uneven in recent months.

China’s growth momentum has stayed strong and balanced, with the government’s attention turning to medium-term structural issues and containment of financial system risks. The recent National People’s Congress meeting ended with a renewed focus on rebalancing demand toward household consumption and shifting growth sources toward high-end manufacturing, the services sector, and small and medium enterprises. The government seems to be leaning toward normalisation of macroeconomic policies, with a lower fiscal deficit and some tightening of monetary policy anticipated later in the year.

Fibre2Fashion News Desk (RKS)